Passenger Railway Agency of South Africa on its 2014/15 Corporate Plan

This premium content has been made freely available

Transport

02 September 2014
Chairperson: Ms Dikeledi Magadzi (ANC)
Share this page:

Meeting Summary

The Passenger Railway Agency of South Africa (PRASA) briefed the Committee on its corporate plan for 2014/15, focusing on its current and future projects.  PRASA had been established in March 2009 to provide passengers with rail and bus services, and also to champion the transformation and integration of public transport in the country.  PRASA represented three primary groups – property, rail and bus.

Since the days of the South African Rail Commuter Corporation (SARCC), the value of PRASA assets had increased from R7.1 billion in 2006/7, to over R36 billion in the 2014/15 financial year.  This growth had been driven by a massive government investment of R25 billion to upgrade the infrastructure. The total rail network in the country covered 2 230 km, and the majority was located in the metropolitan areas for commuter rail services.  There were currently 4 638 metro coaches and 700 buses -- and 560 of those buses were still new, as they had been introduced during the 2010 FIFA World Cup.   

The key strategic objectives of PRASA were focused on strengthening the financial position, improving its financial performance and operational effectiveness, investing in new capacity to meet passenger demand in the medium to long term, building human capital and technical capacity, and improving performance and sustainability through effective implementation and adherence to good corporate governance principles and risk management.

Major challenges that still faced Metrorail included the fact that railway infrastructure and technology had reached the end of its design lifespan, with poor levels of reliability and predictability, higher costs of maintenance, and a failure to contribute to an efficient transport system. Some additional challenges were overcrowding, slow journey times, poor modal integration, a lack of off-peak services, ticketing problems and irregular timetables.

The Members commended PRASA on its work, but raised a shared number of concerns, including the affordability of new trains, the plans in place to deal with low staff productivity and resolving the dispute between PRASA and Transnet.   They asked about the plans in place to deal with challenges involved in PRASA’s mega projects, how to deal with the retention of scarce skills, and how to educate the general public about the impact of train vandalism, cable theft and the burning down of trains.  They questioned the time-frame for the commencement of the Rail Academy Centre of Excellence and whether PRASA was looking beyond the 40-year plan, in terms of budgeting and the upgrading of current trains, as the technology was moving very quickly. One Member asked whether it was possible for PRASA to assist government with the BRT system, especially with 700 Autopax buses, as this could create additional job opportunities. Some Members suggested that PRASA needed to prioritise on an integrated transport system, between taxis, buses and rail, as well as pedestrians. A detailed response was given by PRASA. 
 

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed everyone and indicated that railway transport was the backbone of the South African economy.  It needed to be maintained so as to cope with the growing demand, especially in major cities like Cape Town, Johannesburg and Durban. The importance of PRASA could not be emphasised enough for its role in enabling the public to attend to daily activities. The Committee had an interest in how the entity functioned and met its mandate in the area of managing resources.

Presentation by Passenger Railway Agency of South Africa (PRASA)
Mr Lucky Montana, Chief Executive Officer (CEO), PRASA, introduced his delegation, and said that PRASA was established in March 2009 to provide passengers with rail and bus services and also champion the transformation and integration of public transport. The PRASA strategy was also to improve mobility and accessibility of rail for all South Africans. The legal mandate of PRASA, in terms of the Legal Succession to the South African Transport Services Amendment Act of 2008, was to ensure that, at the request of the Department of Transport (DoT), rail commuter services were provided within, to and from the Republic, in the public interest.   It was also to provide, in consultation with the DoT, for long-haul passenger rail and bus services within, to and from the Republic in terms of the principles set out in section 4 of the National Land Transport (Transnational) Act no.22 of 2000. PRASA represented three primary groups – property, rail and bus. 

Since the days of the South African Rail Commuter Corporation (SARCC), the value of PRASA assets had increased from R7.1 billion in 2006/7, to over R36 billion in the 2014/15 financial year.  This growth had been driven by a massive government investment of R25 billion to upgrade the infrastructure. The total rail network in the country covered 2 230 km, and the majority was located in the metropolitan areas for commuter rail services.  There were currently 4 638 metro coaches and 700 buses -- and 560 of those buses were still new, as they had been introduced during the 2010 FIFA World Cup.   

PRASA was impressed by its passenger numbers, as Metrorail managed about 550 million passenger trips, and the bus service had also showed a massive increase, as it currently had 3.1 million passengers, while Shosholoza Meyl had 1.5 million long distance passengers. The number of train stations had increased, with a growing demand in the Metropolitan areas.   Today, there were more than 585 stations in the country.  Mr Montana said that since September 2010, the focus had been on the delivery of top quality transport services, unlocking the value of the property assets, and shifting from refurbishment to replacement of operating assets.

The key strategic objectives of PRASA focused on strengthening the financial position, improving its financial performance and operational effectiveness, investing in new capacity to meet passenger demand in the medium to long term, building human capital and technical capacity, and improving performance and sustainability through effective implementation and adherence to good corporate governance principles and risk management.

Mr Montana maintained that in 2010, PRASA had managed to identify the key risks that needed to be addressed, and these included an on-going issue causing concern -- the liquidity challenge identified by the Auditor-General (AG) and PRASA’s failure to generate income from the property portfolio. PRASA identified that after the 2010 FIFA World Cup, there had been the problem of a massive and sudden decline in the availability of coaches, with an ageing fleet and infrastructure, and this had resulted in a decline in the level of reliability, which had often led to a commuter backlash. It was important to ensure that the problems facing Metrorail were addressed, as they affected the majority of poor citizens who commuted by train on a daily basis.  Failure to address these issues could negatively impact on the economy of the country.

Other challenges that still faced Metrorail included:
- Railway infrastructure and technology had reached the end of its design lifespan;
- Poor levels of reliability and predictability;
- High costs of maintenance;  
- Failure to contribute to an efficient transport system;
- Overcrowding, slow journey times, poor modal integration;
- Lack of off-peak services, ticketing and irregular time-tables;
- Inability to support economic activity;
- Limited access to socio-economic opportunities for rural and urban poor;
- Economic and structural viability -- factors include long distances, low densities and low income commuters;
- The last train sets were purchased in the mid-1980s;
- Technology is old and inherently obsolete (1950s);
- The average of current coaches is 40 years;

Mr Montana said that PRASA had developed a three-phased turnaround plan.   This included stabilising the commuter rail system, in which R16 billion had been invested from 2006/07 to 2008/09, consolidation of passenger rail entities, and modernisation of the asset base. The stabilisation of commuter rail came after a serious decline in fleet and infrastructure, loss of critical skills (e.g. engineers, artisans and technicians) as some had moved abroad, and also a huge loss of market in terms of a decline in passenger trips. The consolidation of passenger rail entities in 2009/10-2013/14 had focused on the integration of different businesses with disparate cultures, amendment of the Legal Succession Act of 1989, and the creation of a new public entity focusing on passenger services and reporting to the Minister of Transport.  The modernisation of the asset base was based mainly on the replacement strategy from 2014/15 to 2024/25, which had the potential to unlock the value of assets and also reverse the historical under-investment in passenger railways.

A summary of PRASA achievements from 2009 to 2014 included:
- Arresting the decline of commuter rail;
- Establishing of a new public entity (PRASA);
- Increasing the value of assets;
- Introducing of new passenger services;
- Laying the foundations of a modern commuter rail system;
- Taking forward the National Development Plan (NDP) by laying the foundation for a modern rail system over the next 40 to 50 years;
- Acquisition of 600 new, modern trains;
- 70 modern locomotives to sustain the country’s long-distance rail services;
- Rollout of the new electronic interlocking signaling system, new generation stations, speed-gates, etc;
- Introduction of radio communication between trains and train control and operating centres;
- On the financial side, review of accounting for amortization, balance sheet restructuring, recapitalisation of Autopax and a reduction of debt burden, and a real estate strategy to unlock thr value of high yielding properties in the PRASA portfolio

Mr Montana said there were number of key highlights for 2012/13 financial year.   The procurement process in relation to the Rolling Stock Fleet Renewal Programme, and the announcement of the successful bidder (ALSTOM-led GIBELA consortium) had been concluded.   The implementation of the five-year Signalling Upgrade Programme in Gauteng, KwaZulu-Natal and the Western Cape had started. A total of 579 coaches had been delivered as part of the Accelerated Rolling Stock Programme.  As part of the balance sheet restructuring process, investment property had been revalued according to IAS 40 (from R924m to R2.5bn).   Capital expenditure had improved by 82%, from R3.5bn last year to R6.3bn.   The value of assets (excluding investment property) grew by 25%, from R19.4 billion to R24 billion.  The valuation of investment property had increased from R773mil to R1.264 billion.  The company’s solvency had improved, with the debt ratio at 0.17, despite operational challenges and an unfunded mandate within rail.  Metrorail fare revenue, excluding the Government subsidy and other revenue, had grown by 16.3%.   

PRASA planned to introduce a modern fleet and the plan was to migrate from 1950’s technology to a modern fleet which was up to world standards.  This would address the problems of unreliability, breaking down and the cancellation of trains. The procurement of 360 coaches per year for two 10-year contracts would cost an estimated total of R123.5 billion over the 20-year period.  PRASA had also created 65 000 direct and indirect jobs, and the focus was industrialisation through long-term procurement, aiming for above 65% of the value of a coach to be produced locally, and thereby to create further job opportunities.

PRASA’s key future plans were for 3 600 vehicles and 600 trains, with 1 346 passengers per six-car train (Metro); 1 186 passengers per-six car train (Metro Express); commitment to PRASA reliability targets; a design life of 40 years; real time diagnostic data for maintenance planning; passenger counting for operations planning; modern trustworthy energy-absorbing carriage bodies; automatic train protection; powered automatic doors; open-wide gangways for passenger visibility; total CCTV with two weeks’ data storage; and “Black Box” event data recorders.

Mr Montana indicated that PRASA was impressed with the progress made on key projects, as to date two design reviews had been conducted with Gibela, with participation from the Rail Safety Regulator. The Special Needs representatives’ participation was planned for the end of November 2014. There was also a plan to establish a local factory.  To date, a town planner had already been appointed to prepare support documentation for an application to establish a local factory at Dunnottar Park, including and environmental impact assessment (EIA) for the establishment of a township.   The planned handover of the site to Gibela for construction was expected to be in February 2015.  There had also been significant progress on the National Signalling Upgrade Programme, especially on the integration of Gauteng 1 and 2 scope of work.  Corridor and depot modernisation was expected to cover the current and new full fleet by 2034, and five depots were already planned in Braamfontein, Salt River, Wolmerton, Springfield and Durban. The upgrade of line speeds for the PRASA network was expected to be 120km/h, and 160km/h for express trains on priority lines where possible, and the Pretoria to Germiston section was to be prioritised.   PRASA was proud that 27 stations were in various stages of development.  Four were co-funded projects, and 15 stations had been prioritised and construction was likely to start in 2014/15, with one station -- Philippi in Cape Town -- already in the construction phase.

PRASA’s real estate strategy was to ensure that the property portfolio was restructured as a key objective so that it could generate over R1 billion per annum over the next five years and beyond.   Almost 1 655 developmental leases valued at R6 billion could potentially generate close to R700 million revenue per annum. The strategy also focused on high-yielding leases that realised the maximum income, and the acquisition of high-income development leases.  Nine development leases had been completed in 2013/14, realising R120m per annum, and three development leases were being finalised

The Parade concourse and infill deck at Cape Town station was due for occupation in December 2014, and projects for 2015/16 included the Durban station warehouse and Saulsville station development.  An additional R500m had been added to the capital improvement programme to improve the condition of assets posing a threat to safety and crippling daily operations.  This included the realignment of tracks via screening and tamping, to eliminate speed restrictions, and the refurbishment and replacement of rails, turnouts, ballast, and sleepers to ensure the safety of train movements and minimize derailments.

PRASA had identified some key risks and strategic responses, and if it failed to maintain and refurbish the current fleet, the transition to the new high-speed trains was likely to be unsuccessful. There was also a challenge on whether to operate new high-speed trains with old trains simultaneously, as this was likely to cause major delays and further unreliability.   PRASA needed to manage service expectations, as this was the root cause of the commuter backlash and the destruction to key assets.   The disruptions to operations due to violent community protests were a common phenomenon in areas around Cape Town and Johannesburg.

Mr Montana said the fluctuations in rates of exchange had resulted in a failure to deliver on key projects and the PRASA strategy.   The failure to manage rolling stock and modernisation programmes effectively remained a key challenge, and a lack of appropriate skills often resulted in a failure to manage the integration and maintenance of technologies. PRASA was also concerned about low staff productivity as this often resulted in poor performance, and the inability to prevent fatalities and injuries due to poor safety management. There were also concerns about the fact that PRASA was unable to integrate its strategy with transport authorities.

Key capacity-building projects for PRASA inprogress as at the end of July 2014 included 146 technical staff in training, 1 138 learnerships in progress, and 548 bursaries, inclusive of students at tertiary institutions and internal part-time bursaries.

Discussion
Ms S Xego-Sovita (ANC) commended PRASA for its excellent work, but said it was of concern that the presentation did not touch on ways to address the imbalances of the past in terms of railway investment, especially in rural areas.   There was a need to consider the issue of affordability in the introduction of new modern trains, as the target group was mainly the working class.  Was there a programme in place to solve the problem of low staff productivity?  She also asked whether the creation of 65 000 jobs would be permanent, or whether they would be temporary jobs. She asked whether universities were offering relevant curricula for the skills required by PRASA. Why was the presentation silent on the financial statement of PRASA? 

Mr Godfrey Maluleke: Director of Rail Operations, DoT, responded that the Department was planning to establish a single transport economic regulator, and there was already an agreement with the Department Public Enterprises to ensure that this project was possible.   It was the responsibility of the government to determine the price of public transport and the National Land Transport Act capacitated the government to establish a public transport regulator, including the subsidisation of public transport to accommodate the poor. The DoT was aligned with the Department of Education in ensuring that the skills that were needed by PRASA and other entities were taken into consideration, and priority was given to universities offering curricula on rail and maritime studies.

Mr Montana added that the government invested massively in public transport, and this had been evident during the 2010 FIFA World Cup, with an estimated R150 billion invested.   More importantly, over the R103 billion invested in government infrastructural development, about R800 million was in transport.  The government had spent almost R6 billion on the subsidisation of public transport, and this subsidy had come from the DoT and PRASA.  However, PRASA was also aware that poor households were still paying almost 30% of their disposable income on transport, and this was because of people living far from their places of work.

Mr Montana said that low staff productivity had been identified as a risk.   One of the ways to motivate staff was to increase their remuneration and also introduce training in various ways of dealing with the customers. The 65 000 jobs were expected to be permanent, as the people hired in the projects would acquire the experience need to easily enter the labour market.   The financial statement of PRASA had been deliberately omitted, as the audited financial statement would be tabled at the end of September 2014.     

Mr C Hunsinger (DA) said the presentation conveyed a lot of confidence, especially on future projects and the introduction of high-speed trains. He was concerned about the interconnectedness of different modes of transport, and suggested that PRASA needed to prioritise on an integrated transport system between taxis, buses and rail, and also pedestrians. He was impressed with PRASA’s future projections, but the presentation was silent on the entity’s future demands against the backdrop of its planning.

Mr Montana responded that PRASA had prioritised on integrated transport planning, as this was also likely to reduce the cost of travelling. The interconnectedness of different modes of transport was complicated and required the utilisation of all the strengths of different modes of transport, especially in corridors.  PRASA had taken future demands t into consideration and the budget was looking 40 years ahead.

Mr M de Freitas (DA) said there was no doubt that rail needed to be the backbone of public transport in the country. He asked if there was a strategy in place to resolve the problem between PRASA and Transnet. He asked PRASA to elaborate on current and future rail gauging, and how that linked with the Transnet network.  South Africa needed to aspire to become a First World country, and emphasised that the public needed be educated that eating and littering in trains was forbidden. He also asked whether PRASA looked beyond the 40-year plan, in terms budgeting and upgrading of current trains, as the technology was moving very quickly.

Mr Montana responded that PRASA had resolved the dispute with Transnet, and the root cause of the conflict had been the access to the networks and the rail policy between the two entities. PRASA would use the old railways for the new trains, as they only needed to be maintained at the highest level. He agreed that there was a need to educate the public about keeping the trains at a high standard -- clean and safe -- and PRASA was consulting the relevant structures to address this problem.  The new trains were designed for a lifespan of 40 years, but the strategic plan was looking at the long term.  

Mr M Mabika (NFP) asked whether PRASA had a competitor, as this was a main driver of efficiency and reliability. What strategy was in place to avoid a conflict of interest between different modes of transport, as this was the case between taxi drivers and thr Bus Rapid Transit (BRT) system? He said there was a need to ensure that the introduction of high-speed trains would not be exclusionary to poor people, as was the case with the Gautrain.

Mr Montana responded that PRASA had competitors on the road, like taxis and bus services, and it was a highly competitive environment.  However, on the rail side there was no other competitor. PRASA was not entirely responsible for resolving or avoiding a conflict of interests between the different modes of transport.  The government needed to eliminate destructive competition, as it usually forced the taxi drivers out of the market.

Mr L Ramatlakane (ANC) said that the magnitude of PRASA’s future projects would require management structures.    There was also a need to consider price overruns and budget management, so as to meet the stipulated time-frames. He suggested that PRASA needed to build a locally-based skills capacity to deal with the maintenance of trains, so as to empower local people and solve the problem of capital flight. He wanted clarity on the lead period on the Moloto Corridor and the kind of job opportunities it was expected to create.

Mr Montana also agreed that mega projects were costly and the major risk was on the exchange rate fluctuations, as this affected the cost of running projects.  It was important to prioritise on quality rather than the cost, as the cutting of costs sometimes came at the cost of quality. He admitted that PRASA was already had plans to build a locally-based skills capacity to assemble and maintain the trains.   There was a possibility that the Moloto Corridor would be built in the next two years, because of the nature of the project, and said that the operation of the rail was also likely to take time. 

Mr M Sibande (ANC) asked if there were programmes in place to educate the public on the vandalism, cable theft and burning down of trains. He wanted the time-frame for the commencement of the Rail Academy Centre of Excellence as this was important.   He asked about the criteria to be used in the recruitment and training of engineering professionals, and how to ensure that this was geographically spread, especially to those located in rural areas. He suggested that PRASA needed to continue lobbying with other universities, especially those that were previously under-funded.

Mr Montana responded that there was a programme in place to educate the public on the vandalism, cable theft and burning down of trains, and PRASA had just recently signed an agreement with the United Voice of Commuters on the things that needed to be done to educate the public to act responsibly. The Rail Academy Centre of Excellence to develop skills in the field related to transport and technology was still being finalised.  He supported the call to ensure that the training and recruitment of engineers was geographically spread, especially to those located in rural areas. It was important to partner with universities in order to recruit students directly from the tertiary level. 

Mr G Radebe (ANC) wanted to know about the contracts for producing trains, and asked for an update on the time-frame for the delivery of new trains in terms financial years.  He asked whether PRASA had any retention strategy to deal with the loss of critical skills.   PRASA needed to liaise with both the Director-Generals (DGs) of Higher Education and Transport, so as to align each other over skills retention. He also suggested that information about bursaries and learnerships needed to be disseminated to rural areas.

Mr Montana said the first modern train was expected to be tested around October 2014. The retention of scarce skills was difficult, considering the amount of money that countries from abroad were willing to pay, and admitted that PRASA sometimes had to invoke the spirit of patriotism in some of the local engineers and artisans.  PRASA had also introduced a system of cumulative bonuses to ensure that scarce skills were retained.  There was an alignment between PRASA and the Department of Education to ensure skills retention. Mr Montana also supported the call for the dissemination of bursaries and learnerships to rural areas.   

Mr T Mulaudzi (EFF) expressed concern that the presentation had differed from that given to Members, and asked if the new trains would use the same railway lines as the present trains.  He asked if PRASA had any strategy in place to prevent people from hanging outside the doors of the trains, and whether it was possible to introduce cameras inside the trains and at train stations to prevent vandalism and criminal activities. He also asked about the financial statement of PRASA in terms of the AG’s report. He wanted clarity on some members of the staff that had been dismissed for joining an unrecognised union. He wanted further details on the issue of skills development in terms of youth and women empowerment.

Mr Montana apologised and assured Members that they would be given an updated version of the presentation. He said that the new trains would operate on the same railway lines, but these needed to be maintained.  The cost of fixing the trains’ doors was exorbitant, as it was an old technology, so the only alternative was to buy new trains. The introduction of cameras inside the trains was something that was being considered, while PRASA had currently introduced sophisticated cameras inside train stations.  PRASA had also given priority to women’s empowerment and there were projects in place to recruit women for current and future projects.

Ms P Boshielo (ANC) asked whether it was possible for PRASA to assist the government on the BRT system, especially with the 700 Autopax buses, as this could create job opportunities. She suggested that PRASA needed to take advantage of the Spatial Planning and Land Use Management Act, in terms of integrating transport plans both at provincial and municipal level.   

Mr Montana responded that it was likely to be complicated to assist the government in the utilisation of PRASA buses, as this would require the provision in the Legal Succession Act to be amended. He also responded that it was the responsibility of the municipalities to ensure that the integrated transport plan was successful. 

The Chairperson thanked PRASA for the response to the questions posed by Members. She said it was clear that rail was instrumental in the running of South Africa’s economy, and needed to accommodate the working class.

The meeting was adjourned.
 

Present

  • We don't have attendance info for this committee meeting

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: